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assume that forward rates for the next 2 years are given by: r(0.5)=6%, r(1)=7%; r(1.5)=8% and r(2)=9%. In addition, the price of a 7% coupon bond maturing 2.5 years from now is equal to $101 and the price of a 6% coupon bond maturing 3 years from now is equal to $99   a)  Find the 2.5-year forward rate r(2.5). Keep at least 6 decimal digits while doing calculations and reporting the answer. b)  Find the 3 year forward rate r(3). Keep at least 6 decimal digits while doing calculations and reporting the answer.

assume that forward rates for the next 2 years are given by: r(0.5)=6%, r(1)=7%; r(1.5)=8% and r(2)=9%. In addition, the price of a 7% coupon bond maturing 2.5 years from now is equal to $101 and the price of a 6% coupon bond maturing 3 years from now is equal to $99   a)  Find the 2.5-year forward rate r(2.5). Keep at least 6 decimal digits while doing calculations and reporting the answer. b)  Find the 3 year forward rate r(3). Keep at least 6 decimal digits while doing calculations and reporting the answer.

Intermediate Financial Management (MindTap Course List)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 5MC: What would be the value of the bond described in Part d if, just after it had been issued, the...
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 assume that forward rates for the next 2 years are given by: r(0.5)=6%, r(1)=7%; r(1.5)=8% and r(2)=9%. In addition, the price of a 7% coupon bond maturing 2.5 years from now is equal to $101 and the price of a 6% coupon bond maturing 3 years from now is equal to $99

 

a)  Find the 2.5-year forward rate r(2.5). Keep at least 6 decimal digits while doing calculations and reporting the answer.

b)  Find the 3 year forward rate r(3). Keep at least 6 decimal digits while doing calculations and reporting the answer. 

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